By FindLaw Staff | Legally reviewed by Evan Fisher, Esq. | Last reviewed December 29, 2021
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Viewers of the award-winning television show "Breaking Bad" received a master class in money laundering over its five-season run. They watched as chemistry teacher Walter White became ever more proficient at manufacturing illegal drugs, but also watched as he struggled to handle all the money from his illicit operation.
At first, he could deposit it in the bank in "small" amounts (under $10,000), but the money just kept rolling in. He could buy money orders and deposit those in another account, again in small amounts. When his son set up a crowdfunding site to accept donations for Walter's cancer treatment, a friend exploited that to funnel Walter's drug money into his charity. Still, Walter finds himself sitting on so much cash that he runs out of places to hide it. Ultimately, he buys a car wash business, cleaning cars and dirty money at the same time.
Money laundering is a method of concealing the source of illegally obtained money. It is a crime that often accompanies organized crime, white-collar crime, terrorist activities, and drug transactions.
This article discusses forty years of money laundering laws and the federal government's efforts to make organized crime unprofitable.
It is important to understand that money laundering charges are secondary to a primary crime. That original crime is called a "predicate offense," and it is how the "dirty money" was acquired by the individual crook or criminal organization.
Through a series of steps — placement, layering, and integration — that money gains a new background story and is eventually no longer recognizable as connected with a crime.
Over time, federal criminal statutes refined the definition of the crime of money laundering to include:
Money laundering laws were initially enacted to combat the Mafia and organized crime. Criminal law statutes had two goals: to prevent criminals from disguising the origin of funds and to prevent the infiltration and control of legitimate businesses by organized crime. Over time, the focus of law enforcement agencies shifted to the "war on drugs" and, later, to anti-terrorist activity.
The Bank Secrecy Act of 1970 (31 U.S.C. section 5311) is a law enforcement tool that can be used against banks and financial institutions. It requires financial institutions to:
The Office of the Comptroller of the Currency conducts regular anti-money laundering (AML) examinations of banking institutions. The BSA covers banks, credit card companies, insurance companies, and broker-dealers in securities.
The Money Laundering Control Act (MLCA) of 1986 (18 U.S.C. section 1956) prohibits individuals or entities from conducting or attempting to conduct financial transactions using proceeds they know have come from criminal activities with the intent to:
This Act also covers international money laundering schemes. It prohibits the transport or attempts to transport funds in or out of the U.S. for the purposes listed above.
The Act lists more than 250 state, federal, and international crimes. Many of these crimes relate to organized crime activities such as racketeering, drug trafficking, gambling, bribery, and extortion. For foreign crimes, the financial transaction needs to occur, at least in part, in the U.S. The list of federal offenses is long and includes federal healthcare offenses, federal environmental offenses, and more.
When proving a money laundering case, the government does not have to trace the money back to a particular criminal activity or need to prove that the accused knew the exact criminal activity that generated the funds. The prosecution only needs to prove that the accused knew the funds were gained from illicit activities.
If found guilty, defendants could face up to twenty years in prison. Money laundering comes with hefty fines, up to twice the value of the property involved, and any property purchased with funds from criminal endeavors can be confiscated.
The Money Laundering Control Act required that the illegal transaction be done with a certain intent, like tax evasion or concealment. This companion piece of legislation removed the necessity of spending with one of those intentions by making it illegal to knowingly engage or attempt to engage in any financial transaction of greater value than $10,000 using funds from one of the many listed criminal offenses.
Section 1957 carries a maximum penalty of 10 years in prison, fines of twice the amount of the transaction, and confiscation of property purchased with proceeds of crime.
The Travel Act (18 U.S.C. section 1952) made it illegal to travel with the intent of distributing proceeds from a certain list of crimes, or to promote or carry out such crimes. Conviction for such misconduct carries a prison sentence of up to five years.
The federal government has also tried to crack down on the involvement of organized crime in drug trafficking and its use of legitimate businesses for money laundering.
The Anti-Drug Abuse Act of 1988 expanded the definition of "financial institution" to include car dealerships and real estate closers. These financial services businesses often handle large amounts of money, so they were attractive options for funneling large sums of money. These entities are now required to file reports on large currency transactions. They are also required to verify the identity of purchasers in amounts of over $3,000.
The Annunzio-Wylie Anti-Money Laundering Act of 1992 strengthened penalties attached to the Bank Secrecy Act. It also required verification and recordkeeping for wire transfers and required suspicious activity reports.
The Money Laundering Suppression Act of 1994 required banking agencies to enhance training and to review how they refer cases to law enforcement. It also folded "money service businesses" into anti-money laundering laws. These are businesses that cash checks, issue traveler's checks, money orders, or stored value cards, or exchange currency.
The Money Laundering and Financial Crimes Strategy Act of 1998 required banks to develop training for bank examiners. It also required the Department of the Treasury to develop a national strategy and created task forces to concentrate law enforcement efforts in areas where money laundering was most prevalent.
Following the terrorist attacks of September 11, 2001, Congress passed the USA Patriot Act. Title II of the Patriot Act — the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 — focuses almost entirely on money laundering. It criminalized the financing of terrorism.
The Patriot Act created potential criminal liability for financial institutions that are "willfully blind" to money laundering. The Patriot Act requires that all financial institutions check customer identities against lists of known or suspected terrorists. Banks are required to institute an enhanced due diligence procedure for foreign and private banking accounts. They are also prohibited from engaging in business with foreign shell banks.
The Patriot Act improved information-sharing between the government and financial institutions. Banks must now respond to regulatory requests for bank records within 120 hours.
This law can trigger an investigation of a suspect financial institution by the Federal Reserve and the Office of the Comptroller of Currency. If found guilty of illegal activity, a financial institution could face civil fines or criminal prosecution.
The Financial Action Task Force (FATF) is not a U.S. statute but an intergovernmental organization founded in 1989 to combat money laundering. In 2000, it turned its sights on the financing of terrorism. "Combating the Financing of Terrorism" (CFT) is a set of laws and regulations that govern funding and financial services. The FATF maintains a "blacklist" and a "greylist" of nations that fail to take adequate measures to fight money laundering and terrorist financing, or are themselves viewed as terrorist organizations.
The Anti-Money Laundering Act of 2020 (AMLA 2020) expanded whistleblower rewards and protections. It established new Bank Secrecy Act (BSA) violations and enhanced penalties for repeat and egregious offenders.
The original Bank Secrecy Act provided that the Secretary of the Treasury "may" pay a reward, with a limit of $150,000. The AMLA now says the Secretary "shall" pay, and the payment ceiling is 30% of whatever the government collects.
The AMLA tried to close loopholes by requiring shell companies to register a "beneficial owner," someone who has more than 25% of the ownership interest. This information is only reported to the Financial Crimes Enforcement Network (FinCEN) and can only be shared with law enforcement, regulators, and financial institutions.
Financial crimes are complicated. Both prosecutors and defense attorneys require a certain level of expertise. Whether you were charged with the crime or are involved in a case, it helps to know the law. Get the help you need from an experienced criminal defense attorney near you.
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